Abstract

Online reviews could, in principle, greatly improve the match between consumers and products. However, the authenticity of online user reviews remains a concern; firms have an incentive to manufacture positive reviews for their own products and negative reviews for their rivals. In this paper, we marry the diverse literature on economic subterfuge with the literature on organizational form. We undertake an empirical analysis of promotional reviews, examining both the extent to which fakery occurs and the market conditions that encourage or discourage promotional reviewing activity. Specifically, we examine hotel reviews, exploiting the organizational differences between two travel websites: Expedia.com, and Tripadvisor.com. While anyone can post a review on Tripadvisor, a consumer could only post a review of a hotel on Expedia if the consumer actually booked at least one night at the hotel through the website. We examine differences in the distribution of reviews for a given hotel between Tripadvisor and Expedia. We show in a simple model that the net gains from promotional reviewing are likely to be highest for independent hotels that are owned by single-unit owners and lowest for branded chain hotels that are owned by multi-unit owners. Our methodology thus isolates hotels with a disproportionate incentive to engage in promotional reviewing activity. We show that hotels with a high incentive to fake have a greater share of five star (positive) reviews on Tripadvisor relative to Expedia. Furthermore, we show that the hotel neighbors of hotels with a high incentive to fake have more one and two star (negative) reviews on Tripadvisor relative to Expedia.

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Elea McDonnell Feit at Drexel University - Department of Marketing, Eric Bradlow at University of Pennsylvania - Marketing Department, Raghuram Iyengar at University of Pennsylvania - Marketing Department

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Erik Brynjolfsson at Massachusetts Institute of Technology (MIT) - Sloan School of Management, John Little at Massachusetts Institute of Technology (MIT), Xiaoquan (Michael) Zhang at Chinese University of Hong Kong

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